The financial authorities have decided to abolish the foreign investor registration system, which has been maintained for over 30 years and has been cited as a major factor in the ‘undervaluation of the Korean stock market’ (Korea discount). Regarding this, the stock market expressed the opinion that the key is to raise expectations for inclusion in the MSCI advanced index on the surface, but in detail, the possibility of important changes in the business of securities companies should also be pointed out.
On the 25th, Ha In-hwan, a researcher at KB Securities, said, “The policy direction that the financial authorities recently presented at the ‘Policy Seminar to Resolve the Korea Discount’ was ultimately a process for incorporation into the MSCI advanced index, and with the announcement of the abolition of the foreign investor registration system this time, the process is in full swing. “It’s a matter of course, but as the related efforts get into full swing, expectations for foreign capital inflows are expected to expand,” he said.
In fact, foreign net buying is prominent in supply and demand this year. According to the Korea Exchange, foreigners bought 4.2757 trillion won in the stock market for 15 trading days from the 2nd to the 20th. During the same period, individuals and institutions net sold 3.9735 trillion won and 351.5 billion won, which is the opposite.
Citing estimates from the Korea Economic Research Institute, researcher Ha predicted that the scale of foreign capital inflow due to MSCI’s inclusion in the advanced index would reach 18 to 61 trillion won.
However, this is the result of a positive scenario, and you need to consider the case where things didn’t work out the way you wanted. This is the risk faced if the index is not promoted to an advanced index. Researcher Ha said, “Korea’s weighting in the MSCI Emerging Index has declined over the long term, and one of the reasons is because China’s weighting has increased significantly. Another risk may emerge in the future, and India’s weighting continues to It is that it is expanding. If it is not promoted to the MSCI advanced index, it is highly likely that it will face losing weight again.”
Regarding the abolition of the foreign investor registration system, researcher Ha said that it is necessary to closely examine not only the immediate investment perspective but also the future policy and business aspects. It is explained that the issue of resuming short selling, which is the biggest remaining issue, is highly likely to emerge, and in the long run, there is a high possibility that important changes will occur in the business of securities companies to settle a series of policies.
He said, “Most of the problems pointed out by MSCI to Korea have been addressed and will continue to be addressed through the ‘Policy Seminar to Resolve the Korea Discount’ and the ‘Foreign Exchange Market Advancement Plan’. What remains now is ‘full resumption of short selling’.” “From the point when the stock market stabilizes, we need to consider the possibility that the issue of ‘full resumption of short selling’ will emerge,” he said.
“In addition, the role of securities companies will be important in the long term for these policies to settle down,” he said. It’s time to consider it.”
Shin Min-kyung, Hankyung.com reporter radio@hankyung.com